WRQ, Attachmate to merge

Updated 10:00 pm, Monday, April 18, 2005

After competing against each other for more than 20 years, Bellevue-based Attachmate Corp. and Seattle-based WRQ Inc. are merging in a deal led by three private equity firms.

The transaction, terms of which were not disclosed, will bring together two of the oldest and largest privately held software companies in the state.

Together, the combined company will have annual revenue of more than $200 million and about 950 employees. Layoffs will occur, although executives at both companies said the number of reductions will not be determined until the deal closes in late May.

Attachmate Chairman Frank Pritt, who formed the software company in his Bellevue living room in 1982, will retire once the deal is completed. The 64-year-old executive, who addressed employees yesterday at Factoria Cinemas, said it was "painful" to sell the company he started. The announcement was greeted with "mixed emotions" yesterday, Pritt said.

"This is the longest place I have ever worked in my career," said Pritt, who is selling his 70 percent stake in the company. "The decision to sell and not carry it forward myself was tough, but I am glad I am leaving on a high."

Pritt said that the new company will have the financial resources and management talent to take advantage of changes in the marketplace. He also said the cultures of the two companies -- located just 11 miles from each other -- should mesh nicely.

"I think it is a perfect match," he said. "I know (WRQ founder) Doug Walker, and he and I have similar thoughts about business and how to treat employees."

Founded within a year of each other in the early 1980s, WRQ and Attachmate became leaders in developing software that helped large corporations access data from mainframe computers. They had different approaches, with WRQ seen as a technology-oriented company run by software developers and Attachmate considered more of a sales and marketing powerhouse. As part of that, Attachmate traditionally has relied on a direct sales force, whereas WRQ has sold its products through resellers.

WRQ also focused on systems developed by Hewlett-Packard, while Attachmate developed software for Unisys and IBM mainframes.

In the past decade, the businesses have competed more aggressively as the market for host-access and host-integration software has shrunk.

But during the past 10 years, WRQ's Shaun Wolfe said the rivalry never turned bitter as it did with some competitors.

"We have always had a tremendous amount of respect about how we competed," said Wolfe, who will become senior vice president of products and marketing in the new company. "It has been aggressive and showing off the strengths of the two companies, but it has never been personal or problematic in an unprofessional way. ... It has almost been like two athletes at the top of their game who do better because the other is there."

In fact, Pritt said yesterday that Attachmate was contemplating buying WRQ last year.

"We felt we had the resources to purchase WRQ at the time," Pritt said. "We did a lot of analysis here because we are pretty strong company with a lot of buying power, but we never quite threw our name in the hat."

The deal did not progress, he said, because the San Francisco private equity firms proposed merging the two companies.

"We came to the conclusion that we would have our cake and eat it too," Pritt said.

Although there will be layoffs in the near term, Wolfe said the combination of Attachmate and WRQ will create a more powerful company that is based in the Seattle area. The goal is to surpass $500 million in sales, a figure that most likely will occur through more acquisitions, Wolfe said.

"We are looking to build and leverage our size, capacity, distribution muscle and customer base in order to serve as a platform into acquisitions into other markets," Wolfe said. "Acquisitions are a very important part of our strategy."

There also remains the question of where the company will locate its headquarters -- setting up a possible competition once again between an Eastside city and Seattle. Earlier this month, Safeco chose Seattle over Redmond for its permanent headquarters.

No decisions have been made about the location, although Wolfe said the company will stay in the Puget Sound area. Attachmate has 144,000 square feet of space at the crossroads of Interstates 90 and 405 in Bellevue. The company's lease expires in 2007.

WRQ, which recently signed a long-term lease at its Seattle location, occupies about 103,000 square feet.

Besides Hawn and Wolfe, the merged company will be led by Attachmate's Jeff Libby and Bob Flynn. Libby, the chief operating officer at Attachmate, will take on the position of senior vice president of finance and operations. Flynn, who served as senior vice president of worldwide sales at Attachmate, will hold a similar title at the new company.